Management Accounting: A Comprehensive Guide to Costing, Budgeting, and Financial Analysis

Management Accounting
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Contents
Introduction.................................................................................................................................................3
TASK 1.......................................................................................................................................................4
Introduction.............................................................................................................................................4
P1) Describe management accounting and explain essential requirements of different management
accounting systems......................................................................................................................................5
P2) Explain different management accounting reports used by the organization with the importance of
such reports to management....................................................................................................................7
M1) Evaluate benefits of management accounting systems and their application in context of business.
.................................................................................................................................................................9
D1) Evaluate how management accounting systems and management accounting reporting are
integrated in organization......................................................................................................................10
Conclusion.............................................................................................................................................11
TASK 2 (M2, D2).....................................................................................................................................12
A) 1. Explain marginal costing and absorption costing methods.....................................................12
2. Prepare income statement using absorption costing methods and marginal costing methods............12
B) Using Break Even formulae calculate the following:........................................................................14
TASK 3 (LO3 and LO4)............................................................................................................................16
Introduction...........................................................................................................................................16
A. Explain advantages and disadvantages of different planning tools for budgetary control by
providing example of atleast two...........................................................................................................17
B. Show the application of planning tools for preparing, forecasting and analyzing budgets.............19
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C. Compare how organizations are adapting the management accounting system to respond to
financial problem...................................................................................................................................21
D. Analyze how your management accounting techniques could respond to financial problems and
lead the organization to sustainable success..........................................................................................23
E. Evaluate how planning tools can solve the financial problem and lead the organization to
sustainable success................................................................................................................................24
Conclusion.............................................................................................................................................25
Conclusion.................................................................................................................................................26
References.................................................................................................................................................27
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Introduction
The report depicts that how the management accounting plays a crucial role in decision making
of the organization and with this it is also explained that how the management accounting
information is used within organization. The various types of management accounting systems
are also explained and with this the reports which are prepared by the managers of the
organization are also highlighted. The cost is also calculated so that using various cost
techniques by preparing statements using marginal and absorption income statement. The
significance of the planning tools are also determined which are used for the budgetary control
and the positive as well as the negative points of these tools are also highlighted. The ways
through which the management accounting can help in getting rid of the financial problem so
that the sustainability can be attained are also highlighted. The example of Deverell Smith Ltd. is
taken so that all the parameters can be practically explained.
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TASK 1
Introduction
This section gives details with the brief explanation about the management accounting and with
this the various benefits of these systems systems are also highlighted. Further, the various
reports which are used and with this how the management accounting systems and reporting are
integrated has also been thrown light on.
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P1) Describe management accounting and explain essential requirements of different
management accounting systems.
Management accounting investigates about scarcity of the financial resources so that the proper
allocation can be done and the improvement in the Deverell Smith Ltd. can be made (Li, et. al.,
2014). The management accounting or the managerial accounting can be determined as the
process of evaluating, analyzing and recording the financial transactions so that the managers of
Deverell Smith Ltd. can take strategic decisions. And the operations can also be controlled. It
also helps the managers to predict the future by evolving the short and long term policies. It also
enables to determine the financial resources of the organization such as labor, material and other
requirements so that the success in the market place can be made (Li, et. al., 2014). The financial
accounting is different from the managerial accounting as the management accounting provides
the information for the internal users but the financial accounting gives information for external
users.
Types of management accounting systems:
The management accounting systems are used by the managers for taking the crucial decisions
so as to increase the profitability within the organization.
Inventory Management Systems:
The inventory management is the software that is used by Deverell Smith Ltd. so as to track the
level of inventory. It is basically used by the manufacturing industries so that the order bill, and
the work order can be prepared and the documents which are related to inventory. The main
features of the inventory management are to track the assets, reorder, and management of service
and product identification (Li, et. al., 2014). These are the ways which will help in maintaing the
accuracy in the management of inventory so that the data can easily be tracked when needed.
The LIFO and FIFO are the two types of the inventory management. LIFO it explains that the
material which is lastly arrived will be sold first. FIFO says that the stock which is first entered
will; be first out of the stock so that the wastage as well as risk can be reduced.
Cost Accounting Systems:
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